Employers and ACO’s

I was having coffee with a friend of mine today. As an analyst at a prominent national leadership group on employers’ health care issues, he gets to think head-on about some prominent business topics related to health reform – topics the rest of us only realize are important when they come up as problems.

Case in point – he has been tasked with thinking about employers’ role in Accountable Care Organizations – not just as self-insured payers, but more broadly in the context of their role as shapers of legislation and stakeholders in the health of a regional population.

It was a brief but interesting chat -  in about fifteen minutes we were able to think up a handful of the more obvious issues. They tended to be cost-oriented, which makes sense – Businesses tend to focus on their bottom line. If you have any ideas about other areas we missed, I’d be more than happy to hear them.

Cost Shifting – As ACO’s will/have already started to drive market consolidation, we will likely see some form of cost shifting take place, with those in a dominant market position controlling prices, as I’ve noted before. Specifically, since Medicare will be the early driver of ACO funding, ACO’s who are forced to collect at a certain rate might be eager to resecure their funds from private insurers or large self-funded employers.

Facility Fees – This is a specific issue related again to the idea of marketplace consolidation.  Independent Physician  Associations (IPA) who are a loose network of doctors, do not have to charge an extra fee to go towards the maintenance of a large clinic or medical center. I do not know how much of a role this plays (I suspect in the bigger picture it would be less than extraordinary) but it’s another downside of big provider groups emerging in the marketplace.

Patient Selection – As an employer, I would be wondering about if my employees are covered as their own individual group, the same way that they would be under an insurance policy – I don’t want my workers’ rates to be lumped in with those of the asbestos removal company down the street. This necessitates a greater level of risk adjustment capacity within the ACO for one thing, and also raises questions of whether my patients’ preferences (preferred hospital, doc, etc.) are met by a particular ACO’s “network.”

While the conversation was certainly nothing earth shattering, it always helps to look at things from a different perspective. This has helped me see how similar an ACO “contract” seems to a group health insurance policy. This also re-raises the issue of what role insurers have to play in the ACO. I have the feeling there are many more posts on this to come. Again, your thoughts are welcome.

Are ACO’s good or bad for competition?

Earlier this week, I sat in on a roundtable discussion of health insurance plan CEO’s from around the country. The topic jumped from Medicare Advantage bonus payments to general quality improvement, to the insurance industry’s perception by Joe Q. Public, and of course, what role health plans will end up playing in Accountable Care Organizations (ACO).

As any insurance executive would rightly observe, the conversation to date has largely revolved around the providers of care. Because ACOs were designed as much to control health care spending as they were to improve quality, discussions often oversimplify them into a network of doctors and hospitals reimbursed with global capitation or bundled payments (fancy terms for a one time fee as opposed to a ‘fee for service’ itemized bill). The other details – advanced IT infrastructure, rigorous care management programs, skilled nurses and primary care providers, billing and claims competency, and marketing and communications activity, to name a few, are usually forgotten.  But eventually, this stuff will come up, and whoever is ready to roll will find themselves in high demand.

Hospitals and doctors seem to be more focused on getting the money. The early rumblings from the trenches indicate that the ACO craze is causing a shift towards market consolidation – providers of care are merging together, buying each other out and gaining share in their local markets. At my meeting, CEOs from Minneapolis to Seattle and Buffalo to Pittsburgh all reported the same trend in their markets. This is likely being done for a few reasons. The bigger a provider group, the better prices they can demand from insurance companies, as shown last year in a sophisticated study released by the office of Martha Coakley, the Massachusetts State Attorney General:

B. Price variations are not correlated to (1) quality of care, (2) the sickness or complexity of the population being served, (3) the extent to which a provider is responsible for caring for a large portion of patients on Medicare or Medicaid, or (4) whether a provider is an academic teaching or research facility.  Moreover, (5) price variations are not adequately explained by differences in hospital costs of delivering similar services at similar facilities.

C. Price variations are correlated to market leverage as measured by the relative market position of the hospital or provider group compared with other hospitals or provider groups within a geographic region or within a group of academic medical centers.

This means a few things. First, that if ACO’s are simply big groups with lots of clout in their market, they will likely screw over insurance companies on the commercial side to get better rates (I somehow doubt anybody will lose much sleep over this) – especially if Medicare ACO money incentivizes them to cost shift so they don’t exceed those spending targets. (Cost shifting in a nutshell: If a new knee costs $22,000 and Medicare says it will only pay $20,000, a hospital can bump up the price for private insurers like United or Aetna to $24,000 to make up for the difference.) So, any money ‘saved’ by the Medicare program would just be taken out of somebody else’s purse or wallet.

Second – and more importantly, Coakley found that quality has little to do with price. This means that doctors who charge more are probably not taking better care of you – they may just happen to work for a huge clinic that can demand higher prices. The point here is that while ACO’s and health care reform are supposed to be incentivizing health care towards quality, there are opposite forces coming from the market that will compete with these incentives. We know that in America, Capitalism wins – so the success of health reform will be tied in part to whether it has strong enough provisions to bribe doctors into behaving.

The Federal Trade Commission and other health law experts are working to ensure that rules against monopolies and anticompetition are strong enough, well crafted and enforceable to make sure things don’t get out of hand. As summed up by Health Care’s own Yoda, Dr. Donald M. Berwick:

“[We] need to assure both patients and society at large that destructive, exploitative and costly forms of collusion and monopolistic behaviors do not emerge and thrive, disguised as cooperation.”

Health Care in Japan

Check out the latest post at HealthGlobe for some of my thoughts on Japan’s health care system. I’ve been reading T.R. Read’s latest book as well, and he’s got a lot more insight than I have. I’ll pen a post with some thoughts once I finish.

 

Two Weeks in Japan

Hiroshima Castle Tower

Back in October, I was having trouble sleeping one night – I’d been reading about Tim Ferris-style escapades and could not help but wonder if my life was passing me by. So, I booked a 2-week round trip ticket to Japan for the holiday break.

I got back yesterday – what a trip. More than sightseeing or vacationing, I spent two weeks traveling. I was living out of a backpack and moving from city to city, making liberal use of ramen noodles, public washrooms and free wi-fi. Beyond getting my fill of soulsearching, I managed to see a large swath of the country that is Japan. I feel fairly confident I got a good slice of exposure to the people, the customs and the culture.

Below is a city-by-city breakdown of how I spent 2 weeks. Not counting gifts, the trip cost me, very roughly, $3,000 USD. A $1340 flight, about $1100 in cash for food, hostel payments, transportation and other activity-related fees, $550 for an unlimited travel rail pass.

I could have easily saved more money – by traveling with a group, or staying in one place for more than two nights. I’m happy to e-mail you any details or specifics – But honestly, this trip was not about stretching a dime – it was about exploring a country I’ve been daydreaming about for over a decade.

Tokyo (part 1) – December 26^th-29th

No matter what you’ve seen, you cannot prepare for the sheer sensory overload that takes place when you step foot into Tokyo for the first time. It is a very crowded city – over 12.5 million people – that feels a lot bigger than NYC or any other American city I’ve seen. Yet the city is full of quiet corners that leap out at you with their stillness.

• The contrast between “old” and “new” is woven into the fabric of the city. Just when you think you’re in a part of old Tokyo, a skyscraper will appear out of nowhere. And in the middle of downtown, you will find a temple or small back alley of houses tucked away in obscurity.

• Tokyo is the most stylish city I have ever been to, rivaled only maybe by Singapore. Everyone is dressed to the nines, all the time – the business crowd is decked out in suits, the casual crowd is fashion-forward and accessorized to the hilt – everyone looks like they’ve stepped out of a clothing catalog.

Highlights: Getting my Japanese name (Nabé-san – it literally means “hot pot” after the dish we ate) over dinner with 3 Japanese guys I just met on my first night; The views from the 45^th floor of the Tokyo government buildings; The shinkansen (high speed bullet train) ride out of the city, where I saw Mount Fuji and felt perfectly still while hurtling towards Kyoto at 125 mph.

Kyoto – December 29^th- December 30th

Kyoto is old Japan. After leaving the vicinity of the train station, I found temple upon temple scattered through the city. Unfortunately, due to poor weather and a pressing schedule, I did not get to see nearly of this city’s sights as I would have preferred. There’s always next time, I guess…

• Because I went at the peak tourist season (the week between Christmas and New Year), I got to be a part of Japanese tourist crowds. Somehow, this felt more authentic than being part of an American tourist crowd – but my overall impressions were still more that Kyoto has developed into a tourist trap.

• That being said, I did my favorite gift shopping here. Unlike Osaka or Japan, which are filled with the made-in-china kitsch, Kyoto is stocked with genuine, handmade Japanese kitsch. The fresh sweets (doughnuts, pastries, bean buns, ice cream) and coffee also blew me away.

Highlights: The walking trail from Higashimaya (temples, shopping, lots of food stalls, and a host of awesome views over the city); The garden outside of the Sanjusangen-dō temple (1000 statues)

Osaka – December 30^th-January 1^st

I fell in love with the city of Osaka. After a day of feeling like a burnt out tourist in Kyoto, I spent a couple of days wandering around what was a genuine Japanese city. Osaka is a gritty, colorful working class city that has none of the frills of Tokyo, but plenty of the thrills of a big city: bustling nightlife, a seedy underbelly, neon lights galore.

• I was struck by the gruff but kind nature of the city’s denizens. They will not hesitate to throw you some attitude, but are just as helpful as their more respectful and/or robotic counterparts in other parts of Japan. Seeing real Japanese people – like the old man who laughed at and insulted me the whole time he walked me to the front gate of the guesthouse I stayed at – was a real treat.

• I happened to stay at an amazing guesthouse in an ‘off the beaten path’ section of Osaka, which I highly recommend to anybody. Sakura Peace House is run by a woman named Yumi. I got to meet some cool people who know the city well – and as any traveler knows, the people you meet on the road can have a big impact on your trip.

Highlights: Tooling around the back alleys of Osaka on a bike; meeting local Osakans (coffee shop owners, the guy who ran the hat shop, co-owners of a bar; Spending New Year’s at a genuine hippie bar that is definitely worth visiting for the atmosphere; the food, drinks and coffee in Osaka are amazing.

Kagoshima – January 1^st- January 3^rd

Kagoshima is a smaller province off the beaten tourist path. It’s near the southernmost point of Japan’s mainland region. While it’s supposed to be a tropical island, the palm trees were dampened by big clumps of snow on the ground. The whole reason I came here was to see Yakushima island, a tropical, mountainous and mystical island that contains sandy beaches, natural hot springs, and cedarwood forests that are 3,000 years old. Once I heard that these are the woods that inspired Hayao Miyazaki’s film, Princess Mononoke, I had to see it for myself.

• On New Year’s Day (also my birthday), I spent $7 USD to take a 15 minute ferry ride to a volcanic island called Sakurajima, where I spent an hour soaking in volcanic hot springs.

• Downtown Kagoshima is beautiful. All of the new years lights were still up, so it was very nice to see- very small but very well kept. From the ports to the main shopping and nightlife avenues, it was a pleasure to walk around this small town.

Highlights: Hiking up a mountain, exploring my own path and literally stumbling out onto a rock beach on Yakushima; Soaking with 50 other Japanese men in my birthday suit, fittingly enough; Seeing a plume of smoke coming out of Sakurajima at sunrise – a reminder that yes, there is an active volcano >1 mile away.

Hiroshima – January 3^rd – January 4^th

I took the Shinkansen train back up to Hiroshima on the third. I wanted to see for myself the city that was nearly wiped off the map on August 6^th, 1944. Hiroshima has a peaceful feel to it – the city’s layout is very simple, and the peace park where you can see the nuclear disarmament flame, memorials to WWII victims and children killed by the blast, as well as the stunningly bleak remnants of the “A-Bomb dome,” which was left standing despite being only 150 meters from the epicenter of the blast.

• Outside of the WWII-related sights, I saw and enjoyed Hiroshima castle (first picture in this post.) The central temple portion was absolutely mobbed because of the new year, so I visited the encampments and the castle tower, which offers a history museum and sweeping views of the city.

• Hiroshima nightlife: surprisingly great. While not as big as Tokyo or as pervasive as Osaka, the nightlife here was a tamer version of both. There are plenty of restaurants, bars and nightclubs that seem to be bumpin’ at all hours of the night.

Highlights: Ground Zero and the A-bomb dome; The Hiroshima castle tower; Sake and Whiskey tasting at the Ana Crowne Plaza Hotel’s rooftop bar.

Tokyo (part 2) – January 4^th – January 6th

After 10 days of exploring new cities, it was nevertheless strange to have a sensation of familiarity as I returned to Tokyo. At this point I was definitely touristed out – plus I had lots of yen to blow and time to kill. Consequently, I mostly shopped, drank and ate to my heart’s content. I found a secondhand clothing store; I visited Akibahara, the “electronics city,” where I found an 8 gig thumbdrive for ~$7 USD; I even caved in and visited a coin arcade, where I blew nearly $50 USD trying to get a small figurine.

All in all, an amazing trip. I will definitely return in the next few years, probably in a warmer season, to see the northern half of the country and fill in some of the things I missed this time around.